What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2026-02-17 compared with 2025-02-11 · 174 added, 104 removed, 596 unchanged (32% of the section changed)

6 unchanged sentences

In that event, the trading price of our stock could decline, and you could lose part or all of your investment.

Leidos Holdings, Inc.

Annual Report

SUMMARY OF RISK FACTORS

14 unchanged sentences

u Global supply chain issues and inflationary pressures have disrupted supply and increased the prices of goods and services, which could raise the costs associated with providing our services, diminish our ability to compete for new contracts or task orders and reduce customer buying power.

u Our failure to comply with various complex procurement rules and regulations could result in our being liable for penalties, including termination of our U.S.

Leidos Holdings, Inc.

Annual Report

u Our failure to comply with various complex procurement rules and regulations could result in us being liable for penalties, including termination of our U.S.

government contracts, disqualification from bidding on future U.S.

11 unchanged sentences

u Misconduct of employees, subcontractors, agents, suppliers, business partners or joint ventures and others working on our behalf could cause us to lose existing contracts or customers and adversely affect our ability to obtain new contracts and could have a material adverse impact on our business, reputation and future results.

Leidos Holdings, Inc.

Annual Report

u A failure to attract, retain, and develop talent with critical skills, including our leadership team, would adversely affect our ability to execute our strategy and may disrupt our operations.

10 unchanged sentences

u We have made and continue to make acquisitions, investments, joint ventures and divestitures that involve numerous risks and uncertainties.

u Joint ventures, other strategic alliances, and strategic business transactions may not achieve intended results.

We may experience operational challenges in integrating or segregating assets for such a venture or transaction.

Leidos Holdings, Inc.

Annual Report

u Goodwill represents a significant asset on our balance sheet and any impairment of this asset could negatively impact our results of operations, and shareholders’ equity.

11 unchanged sentences

military), either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S.

government, generated approximately 87% of our total revenue in both fiscal 2024 and 2023, and 86% in fiscal 2022.

government, generated approximately 87% of our total revenue in fiscal 2025, 2024 and 2023.

We expect to continue to derive most of our revenues from work performed under U.S.

1 unchanged sentence

Our reputation and relationships with the U.S.

government, particularly with the agencies of the DoD and the U.S.

government, particularly with the agencies of the DoW and the U.S.

Intelligence Community, are key factors in maintaining and growing our revenues, and enable us to provide informal input and advice to government entities and agencies prior to the development of a formal bid.

In addition, negative publicity, including reports from the press or social media coverage, regardless of accuracy or completeness, and which could pertain to employee or subcontractor misconduct, conflicts of interest, poor contract performance, deficiencies in services, reports, products or other deliverables, security breaches or other security incidents or other aspects of our business, could harm our reputation with these agencies and with certain non-U.S.

In addition, negative publicity, including sustained or recurring media coverage, social media commentary, or other public communications that criticize our business practices, the nature of our products or services, or the defense industry more broadly, regardless of accuracy or completeness, and which could pertain to employee or subcontractor misconduct, conflicts of interest, poor contract performance, deficiencies in investment, prioritization, and production, deficiencies in services, reports, products or other deliverables, security breaches or other security incidents or other aspects of our business, could harm our reputation with these agencies and with certain non-U.S.

Due to the sensitive nature of our work and our confidentiality obligations to our customers, and despite our ongoing efforts to provide transparency, we may be unable to or limited in our ability to respond to such negative publicity, which could also harm our reputation and our business.

5 unchanged sentences

government budget, changes in spending or budgetary priorities or delays in contract awards may significantly and adversely affect our future revenues and limit our growth prospects.

Revenues under contracts with the DoD and U.S.

Intelligence Community, either as a prime contractor or subcontractor to other contractors, represented approximately 48% of our total revenues for fiscal 2024, 49% of our total revenues for fiscal 2023 and 44% of our total revenues for fiscal 2022.

government and DoD spending levels are difficult to predict and subject to significant risk.

Revenues under contracts with the DoW and U.S.

Intelligence Community, either as a prime contractor or subcontractor to other contractors, represented approximately 49% of our total revenues for fiscal 2025 and 2023, and 48% of our total revenues for fiscal 2024.

government and DoW spending levels are difficult to predict and subject to significant risk.

Laws and plans adopted by the U.S.

government relating to, along with pressures on and uncertainty surrounding the U.S.

federal budget, potential changes in budgetary priorities and defense spending levels, the appropriations process and the permissible federal debt limit, could adversely affect the funding for individual programs and delay purchasing or payment decisions by our customers.

federal budget, potential changes in budgetary priorities, including initiatives aimed at improving governmental efficiency, and defense spending levels, the appropriations process and the permissible federal debt limit, could adversely affect the funding for individual programs and delay purchasing or payment decisions by our customers.

Considerable uncertainty exists regarding how future budget and program decisions will unfold, including the defense spending priorities of the U.S.

Presidential Administration and Congress and what challenges potential budget reductions will present for us and our industry generally.

In particular, the federal budget and debt ceiling are expected to continue to be the subject of considerable debate, which could have a significant impact on defense spending broadly and our programs in particular.

The budget environment, including budget caps mandated by the Budget Control Act of 2011 (the “BCA”) for fiscal years 2022 and 2023, which were reinstituted with established budget caps for 2024 and 2025 under The Fiscal Responsibility Act of 2023, and uncertainty surrounding the debt ceiling and the appropriations process, remain significant short and long-term risks for the Company.

Considerable uncertainty exists regarding how future budget and program decisions will unfold, including the defense spending priorities of the current administration and Congress, what challenges budget reductions (required by the BCA and otherwise) will present for the defense industry and whether annual appropriations bills for all agencies will be enacted in a timely manner.

government spending levels for defense-related or other programs may not be sustained.

1 unchanged sentence

Such changes in spending authorizations and budgetary priorities may occur as a result of uncertainty surrounding the federal budget and the federal government’s ability to meet its debt obligations, changes in the priorities of the U.S.

Presidential Administration as a result of the recent election cycle, increasing political pressure and legislation, shifts in spending priorities from defense-related or other programs as a result of competing demands for federal funds, the number and intensity of military conflicts or other factors.

Presidential Administration, increasing political pressure and legislation, shifts in spending priorities from defense-related or other programs as a result of competing demands for federal funds, the number and intensity of military conflicts or other factors.

For example, the conflicts between Russia and Ukraine and in the Middle East have resulted in increased security assistance to each of Ukraine and Israel to help preserve their territorial integrity, secure their borders, and with respect to the Russia/Ukraine conflict, improve interoperability with NATO.

Changes in the priorities of the U.S.

Changes in the priorities

Leidos Holdings, Inc.

Annual Report

Presidential Administration in respect thereto could have an adverse impact on our results.

In addition, if government funding relating to our contracts with the U.S.

government or DoD becomes unavailable, or is reduced or delayed, or planned orders are reduced, our contracts or subcontracts under such programs may be terminated or adjusted by the U.S.

government or DoW becomes unavailable, or is reduced or delayed, or planned orders are reduced, our contracts or subcontracts under such programs may be terminated or adjusted by the U.S.

government or the prime contractor.

Our operating results could also be adversely affected by spending caps or changes in the U.S.

government or the DoD’s budgetary priorities, as well as delays in program starts or the award of contracts or task orders under contracts.

Leidos Holdings, Inc.

Annual Report

government or the DoW’s budgetary priorities, as well as delays in program starts or the award of contracts or task orders under contracts.

government also conducts periodic reviews of U.S.

defense strategies and priorities, which may shift DoD or other budgetary priorities, reduce overall U.S.

defense strategies and priorities, which may shift DoW or other budgetary priorities, reduce overall U.S.

government spending, or delay contract or task order awards for defense-related or other programs from which we would otherwise expect to derive a significant portion of our future revenues.

In addition, changes to the federal or DoD acquisition system and contracting models could affect whether and how we pursue certain opportunities and the terms under which we are able to do so.

In addition, changes to the federal or DoW acquisition system and contracting models could affect whether and how we pursue certain opportunities and the terms under which we are able to do so.

A significant decline in overall U.S.

9 unchanged sentences

government does not complete its appropriations before the beginning of the new fiscal year on October 1, government operations are typically funded pursuant to a “continuing resolution,” which allows federal government agencies to operate at spending levels approved in the previous appropriations cycle but does not authorize new spending initiatives.

When the U.S.

government operates under a continuing resolution, delays can occur in the procurement of the products, services and solutions that we provide and may result in new initiatives being canceled.

To the extent the U.S.

Congress is unable to approve the annual federal budget before the expiration of a continuing resolution, funding for new projects may not be available and funding on contracts we are already performing may be delayed.

If Congressional efforts to approve such funding fail, and Congress is unable to craft a long-term agreement on the U.S.

government’s ability to incur indebtedness in excess of its current limits, the U.S.

government may not be able to fulfill its current funding obligations and there could be significant disruption to all discretionary programs, which would have corresponding impacts on us and our industry.

The use of a continuing resolution at prior-year funding levels may limit new contract starts, cancellation of planned new initiatives, constrain production rate increases, delay awards or extensions, and introduce funding uncertainty that could affect bidding, scheduling and profitability.

In addition, a failure to complete the budget process and fund government operations pursuant to a continuing resolution may result in a U.S.

government shutdown, which could result in us incurring substantial costs without reimbursement under our contracts.

If a prolonged government shutdown were to occur, it could result in program cancellations, disruptions and/or stop work orders and could limit the U.S.

government’s ability to effectively progress programs and to make timely payments, and our ability to perform on our U.S.

government contracts and successfully compete for new work.

The delay or cancellation of key programs or the delay of contract payments may have a material adverse effect on our revenue and operating results.

In addition, when supplemental appropriations are required to operate the U.S.

government or fund specific programs and the passage of legislation needed to approve any supplemental appropriation bill is delayed, the overall funding environment for our business could be adversely affected.

We continuously review our operations in an attempt to identify programs potentially at risk from continuing resolutions or failure by the U.S.

government to complete its appropriations process so that we can consider appropriate contingency plans.

From time to time, we have experienced a decline in revenues in our fourth quarter as a result of this annual appropriations cycle, and we could experience similar declines in revenues from future delays in the appropriations process.

4 unchanged sentences

Consequently, programs are often partially funded initially, and additional funds are committed only as Congress makes further appropriations.

If we incur costs in excess of funds obligated on a contract, we may be at risk for reimbursement of those costs unless or until additional funds are obligated to the contract.

If we incur costs in excess of funds obligated

Leidos Holdings, Inc.

Annual Report

on a contract, we may be at risk for reimbursement of those costs unless or until additional funds are obligated to the contract.

In addition, if and when supplemental appropriations are required to operate the U.S.

10 unchanged sentences

see the risk factor “We face intense competition that can impact our ability to obtain contracts and, therefore, affect our future revenues and growth prospects.” Our failure to compete effectively in this procurement environment would adversely affect our revenues and profitability.

Leidos Holdings, Inc.

Annual Report

government may terminate, cancel, modify, renew on less favorable terms or curtail our contracts at any time prior to their completion, and if we do not replace them, this may adversely affect our future revenues and profitability.

6 unchanged sentences

government to not exercise contract options or to terminate, cancel, modify, renew on less favorable terms or curtail our major programs or contracts would adversely affect our revenues, revenue growth and profitability.

For example, as a result of the executive order titled "Prioritizing the Warfighter in Defense Contracting,” future contracts (including renewals) are expected to include provisions restricting stock buybacks and dividends during any period of underperformance, and restricting executive incentive compensation in a manner that is contingent on certain specified criteria, including on-time delivery of projects, increased production, and the facilitation of certain domestic investments and operating improvements.

In addition, we have experienced performance issues under certain of our contracts.

2 unchanged sentences

If a government customer terminates a contract for default, we may be exposed to liability, including for excess costs incurred by the customer in procuring undelivered services and products from another source.

In addition, if the Secretary of War were to determine that any such delays, cost overruns or failures in our performance constitutes underperformance on our contract, we would be required to submit a remediation plan approved by our board within 15 days of such determination, and if such plan is determined to be insufficient or we are not otherwise able to remediate any such underperformance we could be subject to remedies from the Secretary of War including certain enforcement actions.

Depending on the nature and value of the contract, a performance issue or termination for default could cause our actual results to differ from those anticipated and could harm our reputation.

4 unchanged sentences

government’s own capabilities and federal non-profit contract research centers.

For example, some customers, including the DoD, are turning to commercial contractors, rather than traditional defense contractors, for some products and services, and may utilize small business contractors or source work internally rather than hiring a contractor.

For example, some customers, including the DoW, are turning to commercial contractors, rather than traditional defense contractors, for some products and services, and may utilize small business contractors or source

Leidos Holdings, Inc.

Annual Report

work internally rather than hiring a contractor.

The markets in which we operate are characterized by rapidly changing customer needs and technology and our success depends on our ability to invest in and develop products and services that address such needs.

9 unchanged sentences

Our customers reducing, postponing, or canceling spending on projects in respect of which we provide services may reduce demand for our services quickly and with little warning, which could have a material adverse effect on our business, results of operations, and financial condition.

Leidos Holdings, Inc.

Annual Report

Moreover, instability in the credit or capital markets in the U.S.

9 unchanged sentences

These potential sanctions and export controls, as well as any responses from Russia, could adversely affect us and/or our supply chain, business partners, or customers.

Leidos Holdings, Inc.

Annual Report

Global supply chain issues and inflationary pressures have disrupted supply and increased the prices of goods and services, which could raise the costs associated with providing our services, diminish our ability to compete for new contracts or task orders and reduce customer buying power.

7 unchanged sentences

LEGAL AND REGULATORY RISKS

Our failure to comply with various complex procurement rules and regulations could result in our being liable for penalties, including termination of our U.S.

Our failure to comply with various complex procurement rules and regulations could result in us being liable for penalties, including termination of our U.S.

government contracts, disqualification from bidding on future U.S.

6 unchanged sentences

For additional background on the regulations that apply to our business and the related compliance risks, see “Regulation” within Item 1 of this Annual Report on Form 10-K and the risk factor “Our business is subject to governmental review and investigation, which could adversely affect our financial position, operating results and growth prospects.”

Leidos Holdings, Inc.

Annual Report

Government contract laws and regulations can impose terms or obligations that are different than those typically found in commercial transactions.

10 unchanged sentences

The decision to terminate programs or contracts for convenience or default could adversely affect our business and future financial performance.

In addition, proposed comprehensive reforms to the Federal Acquisition Regulations, including those contemplated under Executive Order 14275, “Restoring Common Sense to Federal Procurement,” issued on April 15, 2025, could create uncertainty in our contracting environment and impact our business.

These reforms may result in changes to procurement processes, evaluation criteria, cost allowability, compliance obligations, or reporting requirements that could increase our administrative burden and operating costs.

Transition period or inconsistencies in the implementation of new rules may delay contract awards, complicate bid strategies, or require modifications to existing contracting practices.

In addition, to the extent the proposed reforms ultimately expand the ability of commercial firms to compete for defense and other federal contracts, we may face heightened competition from new market entrants with different cost structures, procurement models, or technological approach, which could pressure our pricing, reduce our win rates, or erode our market share.

If we are unable to adapt efficiently to revised federal procurement requirements, our competitiveness, performance under existing contracts, and financial results could be adversely affected.

The Company continues to evaluate the potential impact for any proposed or contemplated reforms.

Leidos Holdings, Inc.

Annual Report

government may adopt new contract rules and regulations or revise its procurement practices in a manner adverse to us at any time.

6 unchanged sentences

Any new contracting requirements or procurement methods could be costly or administratively difficult to implement and could adversely affect our future revenues, profitability, and prospects.

Additionally, the DoD and other customers are increasingly pursuing rapid acquisition pathways and procedures for new technologies, including through so-called “other transaction authority” agreements ("OTAs").

Additionally, the DoW and other customers are increasingly pursuing rapid acquisition pathways and procedures for new technologies, including through so-called “other transaction authority” agreements ("OTAs").

OTAs are exempt from many traditional procurement laws, including the FAR, and an OTA award may be subject, in certain cases, to the condition that a significant portion of the work under the OTA is performed by a non-traditional defense contractor or that a portion of the cost of the prototype project is funded by non-governmental sources.

10 unchanged sentences

As a result, it may be difficult for us to predict whether a given contracting opportunity will be found to pose an actual or potential OCI, whether such an OCI will be determined to be disqualifying, and if not disqualifying what steps we would be required to take in order to be found eligible to compete for and perform the work.

Leidos Holdings, Inc.

Annual Report

Similarly, OCIs remain an active area of bid protest litigation, increasing the likelihood that competitors may leverage such arguments in an attempt to overturn agency award decisions.

5 unchanged sentences

government contractors (including their subcontractors and others with whom they do business) operate in a highly regulated environment and are routinely audited and reviewed by the U.S.

government and its agencies, including the DCAA, DCMA, the DoD Inspector General, and others.

government and its agencies, including the DCAA, DCMA, the DoW Inspector General, and others.

These agencies review a contractor’s performance on government contracts, cost structure, indirect rates and pricing practices, compliance with applicable contracting and procurement laws, regulations, terms, and standards, and the adequacy of our systems and processes in meeting government requirements.

They also review the adequacy of the contractor’s compliance with government standards for its business systems, including a contractor’s accounting system, earned value management system, estimating system, materials management and accounting system, property management system, and purchasing system.

Leidos Holdings, Inc.

Annual Report

As a result of increased scrutiny on contractors and U.S.

government agencies, audits and reviews are conducted rigorously and the applicable standards are strictly interpreted, increasing the likelihood of an audit or review resulting in an adverse outcome.

A finding of significant control deficiencies in our business system audits or other reviews can result in the suspension of payments or lower billing rates to our U.S.

government customers until the control deficiencies are corrected and the DCMA accepts our remediations.

A finding of material weakness in our business system audits or other reviews can result in the suspension of payments or lower billing rates to our U.S.

government customers until the material weakness is corrected and the DCMA accepts our remediations.

Government audits and reviews may conclude that our practices are not consistent with applicable laws and regulations and result in adjustments to contract costs and mandatory customer refunds.

15 unchanged sentences

Legal Proceedings” along with “Note 21—Commitments and Contingencies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.

Leidos Holdings, Inc.

Annual Report

Investigations, audits, claims, disputes, enforcement actions, litigation, arbitration, or other legal proceedings could require us to pay potentially large damage awards or penalties and could be costly to defend, which would adversely affect our cash balances and profitability, and could damage our reputation.

5 unchanged sentences

Legal Proceedings” along with “Note 21—Commitments and Contingencies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.

Leidos Holdings, Inc.

Annual Report

Our business and operations expose us to numerous legal and regulatory requirements, and any violation of these requirements could harm our business.

10 unchanged sentences

In addition, the application, interpretation and enforcement of these laws and regulations are often uncertain, particularly in new and rapidly evolving areas of technology, and may differ in material respects among jurisdictions, interpreted and applied inconsistently among jurisdictions or in a manner that is inconsistent with our current policies and practices, all of which can make compliance challenging and costly, and expose us to related risks and liabilities.

In the U.S., numerous federal, state, and local data privacy and security laws and regulations govern the collection, sharing, use, retention, disclosure, security, storage, transfer, and other processing of personal information, including protected health information.

In the U.S., numerous federal, state, and local data privacy and security laws and regulations govern the collection, sharing, use, retention, disclosure, security, storage, sale, transfer, and other processing of personal information, including protected health information.

Numerous other states also are enacting or considering, comprehensive state-level data privacy and security laws.

Congress has considered, and will likely in the future consider, additional data privacy and security legislation, to which we may become subject if passed.

As a contractor supporting defense, health care, and national security customers, we are also subject to additional, specific regulatory compliance requirements relating to data privacy and security.

1 unchanged sentence

To the extent that we do not comply with applicable security and control requirements, and there is unauthorized access or disclosure of sensitive information (including personal information), this could potentially result in a contract termination or loss of intellectual property, which could materially and adversely affect our business and financial results and lead to reputational harm.

We will also be subject to numerous emerging and as yet unspecified cybersecurity requirements under the FAR and through federal regulation, to include the DOD Cybersecurity Maturity Model Certification (“CMMC”) program, which, once implemented, will require successful assessment by a third party against specified cyber controls.

We are also subject to the CMMC requirements, which require successful assessment by a third party against specified cyber controls in order to be eligible for contract awards.

To the extent we are unable to achieve or maintain certification at the level required for a particular contract award, we will be unable to bid on such contract awards or follow-on awards for existing work with the DoW, which could adversely impact our revenue and our profitability.

We may also be subject to additional emerging and as yet unspecified cybersecurity requirements under the FAR and other federal regulations.

Should we or our supply chain fail to implement these new requirements, this may adversely affect our ability to receive awards or execute on relevant government programs.

We are in the process of evaluating our readiness against these new requirements and while we have confidence we will meet or

Leidos Holdings, Inc.

Annual Report

exceed requirements, to the extent we do not, we will be unable to bid on such contract awards, which could adversely impact our revenue and our profitability.

The overarching complexity of data privacy and security laws and regulations around the world poses a compliance challenge that could manifest in costs, damages, or liability in other forms as a result of failure to implement proper programmatic controls, failure to adhere to those controls, or the breach of applicable data privacy and security requirements by us, our employees, our business partners (including our service providers, suppliers or subcontractors) or our customers.

We also expect that there will continue to be new proposed laws, regulations, and industry standards concerning data privacy and security, and we cannot yet determine the impact such future laws, regulations and standards, or amendments to or re-interpretations of existing laws, regulations or standards, may have on our business.

Any failure or perceived failure by us, our service providers, suppliers, subcontractors, or other business partners to comply with applicable laws, regulations, our public privacy policies and other public statements about data privacy and security and other obligations in these areas could result in regulatory or government actions lawsuits against us (including civil claims, such as representative actions and other class action-type litigation), legal liability, monetary penalties, fines, sanctions, damages and other costs, orders to cease or change our processing of data, changes to our business practices, diversion of internal resources, and harm to our reputation, all of which could adversely affect our business, financial condition and results of operations.

Leidos Holdings, Inc.

Annual Report

all of which could adversely affect our business, financial condition and results of operations.

We may also incur substantial expenses in implementing and maintaining compliance with such laws, regulations, and other obligations.

19 unchanged sentences

We may be expected to expend resources to monitor, report on, and adopt policies and practices that we believe will improve alignment with our evolving ESG strategy and goals, as well as ESG-related standards and expectations of legal regimes and stakeholders such as customers, investors, stockholders, raters, employees, and business partners.

Leidos Holdings, Inc.

Annual Report

If our practices and disclosures do not meet evolving rules and regulations or our stakeholder expectations and standards (or if we are viewed negatively based on positions we do or do not take or work we do or do not perform or cannot publicly disclose for certain customers and industries), then our reputation, our ability to attract or retain leading experts, employees and other professionals and our ability to attract new business and customers could be negatively impacted, as could our attractiveness as an investment, service provider, employer, or business partner.

3 unchanged sentences

In addition, our share price and demand for our securities could be adversely affected.

Leidos Holdings, Inc.

Annual Report

BUSINESS AND OPERATIONAL RISKS

The effects of an epidemic, pandemic, or similar outbreak have negatively impacted and could negatively impact, our business and financial results.

Any epidemics, pandemics, or similar outbreaks have in the past created (as in the case of COVID-19 and its variants) and could again create economic uncertainty and disruptions to the global economy that could adversely affect our businesses, or could lead to operational difficulties, including travel limitations, that could impair our ability to manage or conduct our business.

Any future epidemic, pandemic, or similar outbreak may have similar impacts, and we cannot currently anticipate the potential impact on our business and results of operations.

Misconduct of employees, subcontractors, agents, suppliers, business partners or joint ventures and others working on our behalf could cause us to lose existing contracts or customers and adversely affect our ability to obtain new contracts and could have a material adverse impact on our business, reputation and future results.

9 unchanged sentences

“Cybersecurity breaches and other information security incidents could negatively impact our business and financial results, impair our ability to effectively provide our services to our customers and cause harm to our reputation or competitive position.”

While we have established policies, procedures, training programs, and other compliance controls designed to prevent and detect misconduct, these measures may not be effective, exposing us to unforeseen risks or losses.

While we have established policies, procedures, training programs, and other compliance controls designed to prevent and detect misconduct, individuals may circumvent these measures and we may be unable to prevent our employees, subcontractors, agents, suppliers, business partners or joint ventures and others working on our behalf from engaging in misconduct, fraud or other improper activities, exposing us to unforeseen risks or losses.

This risk may increase as we continue to grow and engage with new partners.

4 unchanged sentences

Any of these outcomes would adversely affect our business, reputation, and future results.

Leidos Holdings, Inc.

Annual Report

A failure to attract, retain, and develop talent with critical skills, including our leadership team, would adversely affect our ability to execute our strategy and may disrupt our operations.

1 unchanged sentence

Competition for skilled talent is intense, and the costs associated with attracting and retaining them are high and made even more competitive as a result of the external environment, including increasing rates of job transition and low unemployment.

Shifts in public attitudes and policies toward immigration, as well as actual and proposed restrictions on employment-based visas, could impact our ability to attract, retain and develop skilled talent.

In addition, many U.S.

government programs require contractors to have security clearances, some of which can be difficult and time-consuming to obtain and talent with such security clearances are in great demand.

Further, as a result of the executive order titled "Prioritizing the Warfighter in Defense Contracting,” future contracts (including renewals) are expected to include provisions restricting executive incentive compensation in a manner that is contingent on certain specified criteria, including on-time delivery of projects, increased production, and the facilitation of certain domestic investments and operating improvements, which may result in employment by us not being as attractive to key employees than alternatives in businesses not impacted by this executive order.

As a result, it is difficult to retain employees and meet all of our needs for employees in a timely manner, which may affect our growth.

3 unchanged sentences

An inability to retain appropriately qualified and experienced senior executives, our failure to do adequately succession planning, or our failure to continue to develop new leaders could cause us to lose customers or new business.

Leidos Holdings, Inc.

Annual Report

We may not realize the full amounts reflected in our backlog as revenues, which could adversely affect our expected future revenues and growth prospects.

17 unchanged sentences

More generally, any increased or unexpected costs or unanticipated delays in the performance of our contracts, including costs and delays caused by contractual disputes or other factors outside of our control, such as performance failures of our subcontractors, rising inflationary pressures, and fluctuations in interest rates, natural disasters or other force majeure events, could make our contracts less profitable than expected or unprofitable.

Leidos Holdings, Inc.

Annual Report

We use estimates in recognizing revenues, and if we make changes to estimates used in recognizing revenues, our profitability may be adversely affected.

We recognize revenue on our service-based contracts primarily over time as there is a continuous transfer of control to the customer throughout the contract as we perform the promised services, which generally requires estimates of total costs at completion, fees earned on the contract, or both.

We recognize revenue on our service-based contracts primarily over time as there is a continuous transfer of control to the customer throughout the contract as we perform the promised services, which could require estimates of total costs at completion, fees earned on the contract, or both.

This estimation process, particularly due to the technical nature of the services performed, and the long-term nature of certain contracts, is complex and involves significant judgment.

3 unchanged sentences

For a discussion of our use of estimates in the preparation of our consolidated financial statements, see “Critical Accounting Estimates” in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Report, “Note 3—Summary of Significant Accounting Policies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K, and “Note 3—Summary of Significant Accounting Policies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.

Cybersecurity breaches and other information security incidents could negatively impact our business and financial results, impair our ability to effectively provide our services to our customers and cause harm to our reputation or competitive position.

As a government contractor and a provider of information technology services operating in multiple regulated industries and geographies, we and our service providers, suppliers and subcontractors collect, store, transmit, and otherwise process personal, confidential, proprietary, and sensitive information, including protected health information, personnel information, personal information, classified information, controlled unclassified information, intellectual property and financial information, concerning our business, employees, and customers.

Therefore, we are continuously exposed to unauthorized attempts to compromise access, release or otherwise compromise such information through cyber-attacks and other information security threats, including, among other things, physical break-ins, theft, denial-of-service attacks, worms, computer viruses, software bugs, malicious or destructive code, social engineering, phishing attacks and impersonating authorized users, credential stuffing, account takeovers, insider threats, malfeasance or improper access by employees or service providers, human error, fraud, use of AI, “bots” or other automation software, or other similar disruptions.

Therefore, we are continuously exposed to unauthorized attempts to compromise access, release or otherwise compromise such information through cyber-attacks and other

Leidos Holdings, Inc.

Annual Report

information security threats, including, among other things, physical break-ins, theft, denial-of-service attacks, worms, computer viruses, software bugs, malicious or destructive code, social engineering, phishing attacks and impersonating authorized users, credential stuffing, account takeovers, insider threats, malfeasance or improper access by employees or service providers, human error, fraud, use of AI, “bots” or other automation software, or other similar disruptions.

We are also exposed to hackers who have requested “ransom” in exchange for not disclosing information or restoring access to information or systems.

12 unchanged sentences

Further, cybersecurity risks may be heightened as a result of ongoing global conflicts such as the military conflict between Russia and Ukraine and the related sanctions imposed by the United States and other countries, or the ongoing conflict in the Middle East, which continues to expand.

Leidos Holdings, Inc.

Annual Report

We do not control our service providers and our ability to monitor their cybersecurity is limited, so we cannot ensure the cybersecurity measures they take will be sufficient to protect any information we share with them.

8 unchanged sentences

Although we work cooperatively with our customers and other business partners, including our service providers, suppliers, and subcontractors, to seek to minimize the potential for and impact of cyber-attacks and other security threats, we must rely on the safeguards put in place by those entities.

See also the risk factor “Internal system or service failures, or failures in the systems or services of third parties on which we rely, could disrupt our business and impair our ability to effectively provide our services and products to our customers, which could damage our reputation and adversely affect our revenues and profitability.”

See also the risk factor “Internal system or service failures, or failures in the systems or services of third parties on which we rely, could disrupt our business and impair our

Leidos Holdings, Inc.

Annual Report

ability to effectively provide our services and products to our customers, which could damage our reputation and adversely affect our revenues and profitability.”

The occurrence of any unauthorized access to, attacks on cybersecurity breaches of other information security threats to our or our service providers’, suppliers’ or subcontractors’ information technology infrastructure, systems or networks or data, or our failure to make adequate or timely disclosure to the public, regulators, or law enforcement agencies following any such event, could disrupt our infrastructure, systems, or networks or those of our customers, impair our ability to provide services to our customers and may jeopardize the security of data collected, stored, transmitted or otherwise processed through our information technology infrastructure, systems and networks.

7 unchanged sentences

In addition, the failure or disruption of our communications, or those of our service providers, suppliers or subcontractors, could cause us to interrupt or suspend our operations or otherwise adversely affect our business.

Our property and business

Leidos Holdings, Inc.

Annual Report

interruption insurance may be inadequate to compensate us for all losses resulting from any system or operational failure or disruption.

Our property and business interruption insurance may be inadequate to compensate us for all losses resulting from any system or operational failure or disruption.

Our business is subject to disruption caused by physical or transition risks that could adversely affect our operations, profitability and overall financial position.

5 unchanged sentences

In addition to physical risks, climate change risks include longer-term shifts in climate patterns, such as extreme heat, rising sea levels, and more frequent and prolonged drought.

Increased frequency and severity of extreme weather events, which are widely associated with long-term climate change, could disrupt our operations, facilities and supply chain.

Such events could disrupt certain of our operations or those of our customers or third parties on which we rely, including direct damage to assets and indirect impacts from supply chain disruption and market volatility.

We could also incur significant costs to improve the climate resiliency of our infrastructure and supply chain and otherwise prepare for, respond to, and mitigate the effects of climate change.

In addition, current and future reduction in government weather-monitoring or satellite data programs may diminish the predictability of extreme weather events and impair our ability to plan for and mitigation related operational risks.

We could also incur significant costs to improve the climate resiliency of our infrastructure and supply chain and otherwise prepare for, respond to, and mitigate the effects of climate

Leidos Holdings, Inc.

Annual Report

Additionally, transitioning to a low-carbon economy may entail extensive policy, legal, technology and market initiatives.

16 unchanged sentences

Failure to meet these obligations could adversely affect our profitability and future prospects.

Leidos Holdings, Inc.

Annual Report

workmanship, country of origin, delivery of subcontractor components or services, unplanned degradation of product performance, and unauthorized use or modifications of our products and services.

In addition, our offerings cannot be tested and proven in all situations and are otherwise subject to unforeseen problems that could negatively affect revenue and profitability, such as problems with quality and workmanship, country of origin, delivery of subcontractor components or services, unplanned degradation of product performance, and unauthorized use or modifications of our products and services.

Among the factors that may affect revenue and profits could be unforeseen costs and expenses not covered by insurance or indemnification from the customer, diversion of management focus in responding to unforeseen problems, loss of follow-on work, and, in the case of certain contracts, repayment to the government customer of contract costs and fee payments we previously received.

We utilize artificial intelligence, which could expose us to liability or adversely affect our business, especially if we are unable to compete effectively with others in adopting artificial intelligence.

We utilize artificial intelligence, including generative artificial intelligence, machine learning, and similar tools and technologies that collect, aggregate, analyze, or generate data or other materials or content (collectively, “AI”) in connection with our business.

We utilize AI in connection with our business.

There are significant risks involved in using AI and no assurance can be provided that our use of AI will enhance our products or services, produce the intended results, or keep pace with our competitors.

4 unchanged sentences

If the AI tools that we use are deficient, inaccurate, or controversial, we could incur operational inefficiencies, competitive harm, legal liability, brand or reputational harm, or other adverse impacts on our business and financial results.

Additionally, if any of our employees, contractors, consultants, vendors or service providers use any third-party AI-powered software in connection with our business or the services they provide to us, it may lead to the inadvertent disclosure or incorporation of our confidential information into publicly available training sets, which may impact our ability to realize the benefit of, or adequately maintain, protect and enforce our intellectual property or confidential information, harming our

Leidos Holdings, Inc.

Annual Report

competitive position and business.

Further, any output created by us using AI tools may not be subject to copyright protection, which may adversely affect our intellectual property rights in, or ability to commercialize or use, any such content.

In the U.S., a number of civil lawsuits have been initiated related to the foregoing and other concerns, any one of which may, among other things, require us to limit the ways in which our AI systems are trained and may affect our ability to develop our AI-powered products and solutions.

If we do not have sufficient rights to use the data or other material or content on which the AI tools we use rely, we also may incur liability through the violation of applicable laws and regulations, third-party intellectual property, data privacy, or other rights, or contracts to which we are a party.

4 unchanged sentences

states and other foreign jurisdictions are applying, or are considering applying, their platform moderation, data privacy, and security laws and regulations to AI or are considering general legal frameworks for AI.

For example, the EU’s Artificial Intelligence Act (the “AI Act”), which entered into force on August 1, 2024, establishes, among other things, a risk-based governance framework for regulating AI systems operating in the EU.

In particular, several states, including Colorado and California, have passed or proposed laws and regulations that specifically address various facets and uses of AI.

In Europe, the AI Act, which began phasing-in 2025, establishes, among other things, a risk-based governance framework for regulating AI systems operating in the EU.

We may not be able to anticipate how to respond to these rapidly evolving frameworks, and we may need to expend resources to adjust our operations or offerings in certain jurisdictions if the legal frameworks are inconsistent across jurisdictions.

Furthermore, because AI technology itself is highly complex and rapidly developing, it is not possible to predict all of the legal, operational, or technological risks that may arise relating to the use of AI.

As the utilization of AI becomes more prevalent, we anticipate that it will continue to present new or unanticipated ethical, reputational, technical, operational, legal, competitive and regulatory issues, among others.

We expect that our incorporation of AI in our business will require additional resources, including the incurrence of additional costs, to develop and maintain our products and solutions and features to minimize potentially harmful or unintended consequences, to comply with applicable and emerging laws and regulations, to maintain or extend our competitive position, and to address any ethical, reputational, technical, operational, legal, competitive or regulatory issues which may arise as a result of any of the foregoing.

As a result, the challenges presented with our use of AI could adversely affect our business, financial condition and results of operations.

We have classified contracts with the U.S.

7 unchanged sentences

However, historically the business risks associated with our work on classified programs have not differed materially from those of our other government contracts.

Leidos Holdings, Inc.

Annual Report

We have made and continue to make acquisitions, investments, joint ventures and divestitures that involve numerous risks and uncertainties.

1 unchanged sentence

We also may enter into relationships with other businesses to expand our products or our ability to provide services.

Any such transactions will depend in part upon the continued availability of targets or potential partners on favorable terms.

These transactions require a significant investment of time and resources and may disrupt our business and distract our management from other responsibilities.

Even if successful, these transactions could result in unfavorable public perception or reduce earnings for a number of reasons, including the amortization of intangible assets, impairment charges, adverse tax consequences, acquired operations that are not yet profitable, or the payment of additional consideration under earn-out arrangements if an acquisition performs better than expected.

In addition, significant acquisitions, investments and joint ventures can be complex, costly and time-consuming.

Acquisitions, investments and joint ventures pose many other risks that could adversely affect our reputation, operations, or financial results, including that:

Leidos Holdings, Inc.

Annual Report

u we may not be able to identify, compete effectively for or complete suitable acquisitions and investments at prices we consider attractive;

11 unchanged sentences

These divestitures similarly require a significant investment of time and resources, may disrupt our business, distract management from other responsibilities and may result in losses on disposal or continued financial involvement in the divested business, including through indemnification, guarantee or other financial arrangements, for a period of time following the transaction, which would adversely affect our financial results.

Joint ventures, other strategic alliances, and strategic business transactions may not achieve intended results.

We may experience operational challenges in integrating or segregating assets for such a venture or transaction.

We participate in joint ventures, including some instances where we are a minority owner and do not operate the assets, and may enter into other similar arrangements in the future.

Although we have sought to protect our interests, joint ventures and strategic alliances inherently involve special risks and may not achieve the intended results.

Whether or not we hold majority interests or maintain operational control in such arrangements, our joint venture and other business partners may take certain actions and positions, or experience difficulties, that may negatively impact us and/or our reputation, such as:

u Advancing economic, political, social, or business interests or goals that are inconsistent with, or opposed to ours and our stakeholders’;

u Exercising veto rights to block actions that we believe to be in our or the joint venture’s or strategic alliance’s best interests;

u Taking action contrary to our policies or objectives with respect to our investments;

u As a result of financial or other difficulties, being unable or unwilling to fulfill their obligations under the joint venture, strategic alliance, or other agreements, such as contributing capital to expansion or maintenance projects.

Leidos Holdings, Inc.

Annual Report

We continuously evaluate and may in the future enter into additional strategic business transactions.

Any such transactions could happen at any time, could be material to our business, and could take any number of forms, including, for example, an acquisition, merger, sale or distribution of certain assets, refinancing, or other recapitalization or material strategic transaction.

There can be no assurance that our joint ventures, strategic alliances, or additional strategic business transactions will be beneficial to us, whether due to the above-described risks, unfavorable global economic conditions, increases in costs, foreign currency fluctuations, political risks, government interventions, retained liabilities, indemnification obligations, or other factors.

Evaluating potential transactions and integrating completed ones may divert the attention of our management from ordinary operating matters.

In addition, to the extent we consummate an agreement for the sale and disposition of an asset or asset group we may experience operational difficulties segregating them from our retained assets and operations, which could impact the execution or timing of such dispositions and could result in disruptions to our operations and/or claims for damages, among other things.

Goodwill represents a significant asset on our balance sheet and any impairment of this asset could negatively impact our results of operations, and shareholders ’ equity.

4 unchanged sentences

Examples of events could include a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, adverse contract acquisition performance, loss of key personnel, or a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or otherwise disposed.

Adverse changes in fiscal and economic conditions, such as those related to federal budget cuts and the nation’s debt ceiling, deteriorating market conditions for companies in our industry and unfavorable changes in discount rates could result in an impairment of goodwill.

For example, during fiscal 2023, the SES reporting unit refined its portfolio and made strategic business decisions to exit certain product offerings, and cease operations in certain countries in order to align the operations of the reporting unit with its strategic business plan.

15 unchanged sentences

If any of our subcontractors fail to meet their contractual obligations in a timely manner or have regulatory compliance or other problems, our ability to fulfill our obligations as a prime contractor or higher tier subcontractor may be jeopardized.

Compliance with the requirements of the recent executive order titled "Prioritizing the Warfighter in Defense Contracting” may be complex, costly and time-consuming, and our subcontractors may not have the necessary resources to ensure compliance.

Significant losses could arise in future periods and subcontractor performance deficiencies could result in our termination for default.

A termination for default could eliminate a revenue source, expose us to liability and have an adverse effect on our ability to compete for future contracts and task orders, especially if the customer is an agency of the U.S.

A termination for default could eliminate a revenue source, expose us

Leidos Holdings, Inc.

Annual Report

to liability and have an adverse effect on our ability to compete for future contracts and task orders, especially if the customer is an agency of the U.S.

Our services and operations, which sometimes involve using, handling, or disposing of hazardous substances, are subject to numerous environmental, health and safety laws and regulations, pursuant to which we could face potentially significant liabilities, costs or obligations.

4 unchanged sentences

For example, we provide infrastructure and site services necessary to accomplish critical waste management and the continued environmental cleanup of the Hanford Site in southeastern Washington.

In addition, some of our work sites put our employees and others in close proximity with mechanized

Leidos Holdings, Inc.

Annual Report

equipment, moving vehicles, chemical and manufacturing processes, and highly regulated materials.

In addition, some of our work sites put our employees and others in close proximity with mechanized equipment, moving vehicles, chemical and manufacturing processes, and highly regulated materials.

On some work sites, we may be responsible for safety and have an obligation to implement effective safety procedures.

21 unchanged sentences

Not every risk or liability we face is or can be protected by insurance, and for those risks we insure, the limits of coverage that are reasonably obtainable may not be sufficient to cover all actual losses or liabilities incurred.

We are limited in the amount of insurance we can obtain to cover certain risks, such as cybersecurity risks and natural hazards, including earthquakes, fires, and extreme weather conditions, some of which can be worsened by climate change and pandemics.

We are limited in the amount of insurance we can obtain to cover certain risks, such as cybersecurity risks and natural hazards, including earthquakes, fires,

Leidos Holdings, Inc.

Annual Report

and extreme weather conditions, some of which can be worsened by climate change and pandemics.

If any of our third-party insurers fail, become insolvent, cancel our coverage or otherwise are unable to provide us with adequate insurance coverage or renew our insurance coverage on favorable terms, then our overall risk exposure and our operational expenses would increase, and the management of our business operations would be disrupted.

5 unchanged sentences

Any significant claim may have an adverse effect on our industry and market reputation, leading to a substantial decrease in demand for our products and services and reduced revenues, making it more difficult for us to compete effectively, and could affect the cost and availability of insurance coverage at adequate levels in the future.

Leidos Holdings, Inc.

Annual Report

We face risks associated with our international business.

10 unchanged sentences

u political or economic instability, international security concerns and geopolitical conflict in countries where we provide services and products in support of the U.S.

government and other customers in countries, which increases the risk of an incident resulting in injury or loss of life, damage or destruction of property, inability to meet our contractual obligations or retaliatory measures taken in respect thereof;

government and other customers in countries, which increases the risk that our employees may suffer injury or bodily harm, or be killed or kidnapped while providing such services or products, or risk of an incident resulting in damage or destruction of property, inability to meet our contractual obligations or retaliatory measures taken in respect thereof;

u the ongoing conflict between Russia and Ukraine, which has resulted in the imposition by the U.S.

and other nations of restrictive actions against Russia, Belarus and certain banks, companies and individuals;

u the ongoing conflict in the Middle East, which continues to expand.

u the ongoing conflict in the Middle East.

We are also subject to the U.S.

11 unchanged sentences

We and our third-party business partners, representatives, and agents may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities, and we may be held liable for the corrupt or other illegal activities of our employees or such third parties even if we do not explicitly authorize such activities.

The FCPA or other applicable laws and regulations also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions.

The FCPA or other applicable laws and regulations also require that we keep accurate books and

Leidos Holdings, Inc.

Annual Report

records and maintain internal controls and compliance procedures designed to prevent any such actions.

While we have implemented policies and procedures to address compliance with such laws, we cannot assure you that our employees or other third parties working on our behalf have not engaged or will not engage in conduct in violation of our policies or applicable law for which we might ultimately be held responsible.

7 unchanged sentences

presence expands and as we increase sales and operations in foreign jurisdictions.

Leidos Holdings, Inc.

Annual Report

For additional information regarding government investigations and reviews we are subject to, see “Government Investigations and Reviews” in “Note 21—Commitments and Contingencies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.

4 unchanged sentences

In addition to protection under the law and contractual arrangements with our corporate and joint venture partners, employees, consultants, advisors, service providers, suppliers, subcontractors, and customers, we generally attempt to limit access to and distribution of our proprietary information.

Although our employees and contractors are subject to confidentiality obligations and use restrictions, this protection may be inadequate to deter or prevent them from infringing, misappropriating, or otherwise violating our confidential information, technology, or other intellectual property or proprietary rights, and can be difficult to enforce.

In addition, trade secrets are generally difficult to protect, and some courts inside and outside the United States may be less willing or unwilling to protect trade secrets.

Although our employees and contractors are subject to confidentiality obligations and use restrictions, this protection may be inadequate to deter or prevent them or other third parties from infringing, misappropriating, or otherwise violating our confidential information, technology, or other intellectual property or proprietary rights, and can be difficult to enforce.

In addition, trade secrets are generally difficult to protect or enforce, and some courts inside and outside the United States may be less willing or unwilling to protect or enforce trade secrets.

We may be unable to detect unauthorized use of our intellectual property or otherwise take appropriate steps to enforce our rights.

1 unchanged sentence

We may be required to expend significant resources and efforts to monitor and protect our intellectual property and other proprietary rights, and we may conclude that, in at least some instances, the benefits of protecting our intellectual property or other proprietary rights may be outweighed by the expense or distraction to our management.

We may initiate claims or litigation against third parties for infringement, misappropriation, or other violations of our intellectual property or other proprietary rights or to establish the validity of our intellectual property or other proprietary rights, but outcomes in any such litigation can be difficult to predict and could be time-consuming, result in significant expense to us and divert the efforts of our technical and management personnel.

We may initiate claims or litigation against third parties for infringement, misappropriation, or other violations of our intellectual property or other proprietary rights or to establish the validity of our intellectual property or other proprietary rights, but outcomes in any such claims or litigation can be difficult to predict and could be time-consuming, result in significant expense to us and divert the efforts of our technical and management personnel.

Additionally, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

6 unchanged sentences

government could adversely affect our competitive position, business, financial condition, results of operations and prospects.

We also may be limited in our ability to disclose or license such information and intellectual property to third parties and the U.S.

We also may be limited in our ability to disclose or license such information and intellectual

Leidos Holdings, Inc.

Annual Report

property to third parties and the U.S.

government may also decline to make the intellectual property of others available to us under acceptable terms.

Third parties may also, from time to time, claim that we have infringed the intellectual property rights of others, resulting in claims against our customers or us, or we may face allegations that we or our service providers, suppliers, subcontractors, or customers have violated the intellectual property rights of others.

Third parties may also, from time to time, claim that we have infringed or misappropriated their intellectual property rights or the intellectual property rights of others, resulting in claims against our customers or us, or we may face allegations that we or our service providers, suppliers, subcontractors, or customers have violated the intellectual property rights of others.

Even if we believe that intellectual property-related claims are without merit, litigation may be necessary to determine the scope and validity of intellectual property or proprietary rights of others or to protect or enforce our intellectual property rights.

1 unchanged sentence

Such claims could also subject us to injunctions and significant liability for damages, potentially including treble damages if we are found to have willfully infringed a third party’s intellectual property rights.

In addition, our contracts generally indemnify our customers for third-party claims for intellectual property infringement by our services and products.

Besides the expense and time to defend such claims and the cost of any large indemnity payments, any dispute with a customer with respect to such obligations could also have adverse effects on our relationship with that customer and other existing and new customers, requiring us to pay substantial royalty or licensing fees, and divert management’s attention, any of which could harm our business, financial condition and results of operations.

Leidos Holdings, Inc.

Annual Report

In addition, our contracts typically indemnify our customers for third-party claims for intellectual property infringement by our services and products.

Besides the expense and time to defend such claims and the cost of any large indemnity payments, any dispute with a customer with respect to such obligations could also have adverse effects on our relationship with that customer and other existing and new customers, require us to pay substantial royalty or licensing fees, and divert management’s attention, any of which could harm our business, financial condition and results of operations.

Changes in tax laws and regulations or exposure to additional tax liabilities could adversely affect our financial results.

2 unchanged sentences

Changes in U.S.

(federal or state) or foreign tax laws and regulations, or their interpretation and application, including those with retroactive effect, could result in increases in our tax expense and adversely affect our financial results.

(federal or state) or foreign tax laws and regulations, or their interpretation and application, including those with retroactive effect, could result in increases to our tax expense and adversely affect our financial results.

On July 4, 2025, H.R.1 Reconciliation Act, commonly referred to as the One Big Beautiful Bill Act ("OBBBA") was enacted.

The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business deductions.

The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027.

The OBBBA had a material impact on our consolidated financial statements for fiscal 2025.

See “Liquidity and Capital Resources” in “Item 7.

16 unchanged sentences

We may from time to time enter into foreign currency contracts, foreign currency borrowings or other techniques intended to hedge a portion of our foreign currency exchange rate risks.

These hedging activities may not completely offset the adverse financial effects of unfavorable movements in foreign currency exchange rates during the time hedges are in place.

These hedging activities may not completely offset the adverse financial effects of unfavorable movements in foreign currency exchange rates during the

Leidos Holdings, Inc.

Annual Report

time hedges are in place.

Any of these risks might have an adverse impact on our business operations and our financial position, results of operations or cash flows.

The effects of an epidemic, pandemic, or similar outbreak have negatively impacted and could negatively impact, our business and financial results.

Any future epidemic, pandemic, or similar outbreak may have similar impacts, and we cannot currently anticipate the potential impact on our business and results of operations.

RISKS RELATING TO OUR STOCK

3 unchanged sentences

In addition, the timing and amount of share repurchases under Board-approved share repurchase plans are within the discretion of management and will depend on many factors, including our ability to generate sufficient cash flows from operations in the future or to borrow money from available financing sources, results of operations, capital requirements, general business conditions, and applicable law.

In addition, as a result of the recent executive order titled "Prioritizing the Warfighter in Defense Contracting,” future contracts (including renewals) are expected to include provisions restricting stock buybacks and dividends during any period of underperformance.

Our payment of dividends and share repurchases could vary from historical practices or our stated expectations.

2 unchanged sentences

Some provisions of our certificate of incorporation and bylaws may delay, discourage, or prevent a merger or acquisition that our stockholders may consider favorable, including transactions in which stockholders might receive a premium for their shares.

Leidos Holdings, Inc.

Annual Report

us requiring approval by the holders of a majority of the voting power of such securities that are not owned by the related person unless approved by a majority of continuing directors or certain other exceptions;

These restrictions, which may also make it more difficult for our stockholders to elect directors not endorsed by our current directors and management, include mergers and certain other business combinations between a related person and us requiring approval by the holders of a majority of the voting power of such securities that are not owned by the related person unless approved by a majority of continuing directors or certain other exceptions;

our stockholders may not act by written consent;

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors